compromise agreementsemployment lawemployment tribunalsex gratia paymentredundancy

I’ve recently returned from a New Year’s break driving an Alfa Romeo around Lake Como. Before that sounds too glamorous, let’s dial it back a bit and state that, firstly, we were in a small (but cute) apartment in a secluded spot next to the lake and, secondly, that we were upgraded for free three times over to the Alfa Romeo (from Fiat to Ford to a smaller Alfa to a Alfa Romeo Guilia). No complaints though – the Guilia definitely drove better than the Fiat 500X we booked on the cheap!

Obviously, the first thought that comes when driving a hire car around the twisting, narrow roads of Lake Como is DON’T CRASH IT! That feeling is multiplied when the car in question is worth more than your own and when you quickly learn that Italian drivers have a habit of driving bang in the middle of the narrow, twisty roads that barely have room for two cars to pass each other!

So, why the reference to employment law and the issue of employer-employee settlements?  (Which are otherwise known as ‘amicable exits’ – please don’t use the phrase ‘golden handshake’, it’s so 2009…)  Well, because the parallel of driving down narrow, twisty roads is similar to negotiating a Settlement Agreement (from whichever side). How so?

Firstly, when a Settlement Agreement is offered, both parties basically are committing to a choice: certainty and a clean break now (i.e. an employee obtaining an agreed sum in exchange for not bringing future legal action) or uncertainty and a potential Employment Tribunal claim (or other) down the line.

Within our metaphor, the employee and employer are both driving cars in the opposite directions down said twisty, narrow Italian road. They are driving in opposite directions because, usually, their aims are different. The employer has a long-term view of wanting the business to grow, develop and avoid loss, which is usually a slightly different direction to the more short-term view of the employee who wants to pay the bills and have potential progression and job security now. This is commonly seen during redundancy processes (the employee may be very shocked at being placed at risk of redundancy whereas, for the employer, it has probably been a potential plan for their mind for a while).

Usually, both employer and employee will be driving in the middle of their collective road (which is the comfort zone section of the road away from the edges) until something comes along which is challenging and pushes them towards the harsh edge on the hypothetical road of employment.

In the case of a settlement negotiation, the question will be whether both parties compromise (there is a good reason why Settlement Agreements used to be called ‘compromise agreements’) and agree to share the degree to which they move closer to the edge of the road in order to let the other pass (by way of clean break) or they don’t and they risk collision within an Employment Tribunal, where the Judge decides who was at fault for the messy ‘collision’ of wills.

Obviously, within the scenario above, the employer is likely to be driving the more expensive car (as they are likely to have more back-up funds to spend on legal advice than the employee) but the risk of reputational damage to the business may lead to them wanting to protect that car (i.e. you are more protective of an Alfa Romeo than a Fiat 500X).  In terms of the employee, whilst their ‘car’ may be cheaper (i.e. they may be unlikely to wish to survive for several months without wage or financial settlement), they may take more risks with it and be more prepared to risk an Employment Tribunal claim for this reason.

Due to the above, settlements are usually looking to negotiate a position where the parties can pass each other safely without need for possible collision and/or financial damage to the other.  And, as witnessed by my driving style in the Italian Lakes recently, those with most to lose, tend to drive the most cautiously (i.e. random, battered Citroen C1 flying round the corner on two wheels by an Italian racer beats the cautious English driver looking to protect his pretty Alfa Romeo!)